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2024
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[2024] ZANCHC 92
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Member of the Executive Council: Northern Cape Department of Agriculture, Environmental Affairs, Rural Development and Land Reform v Bester N.O and Others (1793/2022) [2024] ZANCHC 92 (15 April 2024)
IN THE HIGH COURT OF
SOUTH AFRICA
(NORTHERN
CAPE DIVISION, KIMBERLEY)
CASE
NO.: 1793/2022
Date heard: 13-04-2023
Date delivered:
15-04-2024
Reportable:
Yes/No
Circulate
to Judges:
Yes/No
Circulate
to Magistrates:
Yes/No
In
the matter between:
THE
MEMBER OF THE EXECUTIVE COUNCIL:
Applicant
NORTHERN
CAPE DEPARTMENT OF AGRICULTURE,
ENVIRONMENTAL
AFFAIRS, RURAL DEVELOPMENT
AND
LAND REFORM
and
HERMAN BESTER
N.O.
1
St
Respondent
(Joint
business rescue practitioner of the third respondent)
AVIWE
NDYAMARA N.O.
2
nd
Respondent
(Joint
business rescue practitioner of the third respondent)
NIEUWOUDTVILLE
ROOIBOS (PTY) LTD
3
rd
Respondent
(Registration
Number: 2008/023997/07)
IN
BUSINESS RESCUE
THE
COMPANIES AND INTELLECTUAL PROPERTY
COMMISSION
(CIPC)
4th Respondent
ALL KNOWN AFFECTED
PERSONS
Fifth and further Respondents
CORAM:
WILLIAMS J
JUDGMENT
WILLIAMS
J:
Introduction
1.
The applicant, the MEC of the Executive Council:
Northern Cape
Department of Agriculture, Environmental Affairs, Rural Development
and Land Reform, referred to herein as either
the MEC or the
Department, brought this application on an urgent basis on 20 January
2023 seeking relief in Part A of its Notice
of Motion that inter
alia: The first respondent, Herman Bester NO (Bester) be
suspended with immediate effect as business
rescue practitioner of
the 3
rd
respondent, Niewoudtville Rooibos (Pty) Ltd (the
Company); that Bester hand over full control of all bank accounts and
documentation
is respect of the Company to the 2
nd
respondent, Aviwe Ndyamara NO (Ndyamara); and directing that pending
the outcome of Part B of the application, Ndyamara be entitle
to act
as if he is the sole business rescue practitioner of the Company.
2.
Part B of the Notice of Motion envisages the
Department to make
application for the removal of Bester as business rescue practitioner
of the Company with immediate effect;
to have Bester declared a
delinquent director; and that costs of the application in the event
of opposition be ordered on the attorney
and client scale and in
respect of Bester, de bonis propiis, jointly and severally.
3.
After certain postponements, to which I will
revert in due course,
the application was eventually argued on 13 April 2023. At that
stage the parties agreed that the relief
sought in Part A be
disregarded and that Part B of the application be determined.
Background
4.
The Company was registered during 2009 by
the Department as a vehicle
for the purchasing, packaging and marketing of rooibos tea in the
Northern Cape. The main aim
was to localise a rooibos tea
processing plant, not only for the benefit of the province but to
support and promote the emerging
farmers in the Northern Cape.
The goal was for these emerging farmers to obtain with shareholding
in the Company together
with commercial farmers, investors and the
Department. At the moment the Department is still possessed of
100% of the shareholding
in the Company.
5.
The stockpiling of tea during 2018, when tea
prices were escalating,
to the sale of the tea at lower prices than what it was purchased for
during 2019 due to floundering tea
prices and the COVID19 pandemic of
2020, were amongst the factors which resulted in the Company
experiencing cash flow problems
during this period.
6.
As a result, one of the largest commercial
suppliers of tea to the
Company, Cloudskraal Boerdery CC successfully applied during 2020 to
place the Company under business rescue.
Cloudskraal was owed
R1, 7 million by the Company at the time. Bester was appointed
as the business rescue practitioner.
The
complaints against Bester
7.
The department’s complaints against
Bester are manifold and
include inter alia the following:
7.1
Bester’s appointment as business rescue practitioner has not
been confirmed at the first meeting of creditors (or any other
meeting) as required in terms of s131(5) of the Companies Act 71
of
2008 (the Act);
7.2
Contrary to the business rescue plan and the Memorandum of Agreement
with the Department, he entered into additional procurement
agreements with commercial farmers for the supply of tea when the
Company was already over-supplied with tea stock and thereby
increased the Company’s indebtedness even further;
7.3
Bester entered into loan agreements at excessive interest rates with
entities not registered as financial service providers and despite
the fact that the Department had already provided post commencement
funding in an amount of R20 million.
7.4
Bester decided to package tea at the processing plant, which is not
done in the industry and which resulted in huge costs to the Company,
thus further exacerbating its financial problems.
7.5
He entered into agreements with Crown tea (Pty) Ltd and 365 brands
(Pty) Ltd which were detrimental to the Company;
7.6
He appointed consultants and additional contract workers, thus
increasing
operating costs;
7.7
He is incompetent, fails to comply with his obligations as a business
rescue practitioner, may have engaged in illegal acts and has been
shown to be conflicted and lacking independence;
7.8
He failed to provide monthly reports to affected parties and the
Court and has not prepared audited financial statements since
commencement of the business rescue process;
7.9
He failed to turn the Company around after more than two years of
business rescue.
7.10
He attempted to have the Company liquidated even though the Company
is capable of being
rescued; and
7.11
He refuses to comply with the terms of the agreement entered into
between the parties which
was made an order of court in order to keep
the liquidation of the Company in abeyance.
8.
The Department is therefore of the view that
the grounds for the
removal of a business rescue practitioner as provided for in s139 (2)
(a) to (e) of the Act are present.
For the sake of
completeness, s139 (2) in its entirety reads as follows:
“
139.
Removal and replacement of practitioner.
(2)
Upon request of an affected person, or on its own motion, the court
may remove a practitioner
from office on any of the following
grounds:
(a)
Incompetence or failure to perform the duties of a business rescue
practitioner of the particular
company;
(b)
failure to exercise the proper degree of care in the performance of
the practitioner’s functions;
(c)
engaging in illegal acts or conduct;
(d)
if the practitioner no longer satisfies the requirements set out in
section 138(1);
(e)
conflict of interest or lack of independence; or
(f)
the practitioner is incapacitated and unable to perform the functions
of that office, and
is unlikely to regain that capacity within a
reasonable time.
The
business recue practitioner’s version
9.
Bester in his answering affidavit denies the
allegations against him
as being mainly uncorroborated and/or hearsay. His version can
be encapsulated as follows:
9.1
His appointment as business rescue practitioner was confirmed in a
meeting with creditors held on 8
August 2020. He attached as
confirmation hereof a minute of the meeting kept by one of the
creditors Mr A Nel.
9.2
When he was appointed business rescue practitioner, the Company was
in debt to the tune of R50, 9 million.
The original business
rescue plan provided for the reduction by 50% of the tea supply
agreements of 2020 in order to reduce the
obligations of the Company
by about R15 million. After this deduction the indebtedness of
the Company was be reduced to about
R35, 7 million. The first
business rescue plan was published on 28 September 2020 and adopted
on 10 October 2020. The
Department’s averment that the
Company was indebted to the tune of R23.4 million at the start of
business rescue is therefore
wrong.
9.3
Bester, representing the Company, had entered into a Memorandum of
Agreement with the Department during
November 2020 in which the
parties agreed inter alia to (i)The reduction in tea supply as stated
above in paragraph 9.2; (ii) that
supply agreements be renegotiated
for the 2021 season based on market pricing; (iii) that services be
procured to market especially
retail-packed tea and value-added
products utilising a fully paid high volume machine and associated
packaging materials; (iv)
that the Department will raise R15 million
grant funding within 60 days of the meeting of 9 October 2020, which
will contribute
towards the payment of creditors, prioritising
emerging farmers; the Department raised an additional payment of R5
million specifically
for the payment of the high speed packaging
machine and associated costs of packaging; (v) Bester was to raise
outstanding funds
through post-commencement financing and/or selling
of tea or through other suitable means to the value of at least R20
million
to pay the remaining creditors; (vi) Bester was to secure the
services of a marketing agent or services to market the especially
retail-packaged tea and value added products; (vii) Bester had to
ensure compliance with the business rescue plan as adopted and
(viii)
attend to payment of the credit facility with Standard Bank.
9.4
Bester maintains that he has complied with his obligations in terms
of the business rescue plan and
the MOA and that the complaints
levelled by the applicant are without substance. He explains
that:
9.4.1
He had reduced the 2020 tea volumes be 50% in terms
of the business
rescue plan and MOA, and that he did not sign additional contracts
with the farmers as alleged. Tea was acquired
in terms of the
pre-existing contracts entered into by the Department. He could
not simply suspend or terminate the contracts
with the farmers since
it would have made them pursue other markets leaving the company
destitute when it needed supplies.
In any event he explains,
s136 of the Act is very clear under what circumstances a contract may
be terminated and agreements cannot
simply be suspended without a
court order. I will revert to this last statement.
9.4.2
In line with his obligation to obtain post-commencement
finance he
sourced loans which were meant to be short term loans with the plan
to exit these loans once an equity partner was obtained
or a joint
venture was concluded. The interest rates negotiated for the
loans were higher than those of commercial banks
which were not
interested in supplying finance to the Company due to the fact that
it is in business rescue.
9.4.3
As far as the complaint that Bester appointed consultants
and extra
workers at additional operating costs is concerned, he explains that
consultants were appointed in terms of the business
rescue plan and
MOA and that the extra workers could be employed after the contracts
with Crown Tea and 365 Brands were entered
into. This achieving
one of the objectives of the company i.e. the uplifting and
empowerment of the community.
9.4.4
He denies that there was anything untoward in the agreement
entered
into with Crown Tea. He states that the Crown Tea deal was
vital to the Company to have at least one retailer to
purchase
packaged tea in order to obtain exposure to other such retailers and
the international market. After signing the
Crown Tea agreement
the Company appointed 365 Brands as its distributor which negotiated
a listing in respect of the Company’s
own brand –
Bokkeveld Rooibos, with Pick ‘n Pay. 365 Brand is in the
process of sourcing other wholesale listings
in addition to Pick ‘n
Pay.
He states that the
selling price of tea to Crown Tea is in line with that of the
Bokkeveld Rooibos brand. The packaging of
the tea is done at
the plant and with the High Speed packaging machine (also mentioned
in the MOA and which was purchased for this
purpose before the
Company went into business rescue). The selling price of the
tea to Crown Tea and through 365 Brands includes
the packaging
thereof and the Department is thus incorrect in alleging that the
company is carrying the costs of such packaging.
Crown Tea unfortunately
fell into arrears with their payment to the Company. An amount
of R3. 9 million was thereafter written
off in the books of the
Company to recoup the input VAT, which amount was repaid by SARS.
Crown Tea has however not been
released from its obligation to make
payment to the Company, but it would now be over a longer period.
9.4.5
Bester has also refuted the allegation by the Department
that he
failed to provide monthly reports to affected parties by attending
such reports for each month that he had been business
rescue
practitioner and which he states have been circulated to all affected
parties inclusive of the Department. He however
fails to deal
with whether reports have been submitted to court as well.
9.4.6
He had also in terms of the business rescue plan and
MOA attempted to
procure equity partners in the shareholding of the company in order
to relieve some of the financial burden, but
those opportunities were
not availed of by the Department since most of the interested
entities required a majority shareholding.
In furtherance of
the need to find a suitable partner the Department appointed a
transactional advisor, Nolutha Consulting.
He provided Nolutha
with all the relevant financial documentation required in order to
fulfil its mandate. Audited financial
statements were also
provided to the Department’s financial head, Ms Catita.
These are attached to his
affidavit.
9.4.7
The difficulty in finding a suitable equity partner
in order to save
the company on the one hand and creditors demanding to be paid on the
other, led to an amended business rescue
plan.
9.4.8
Bester explains that he had proposed an amended business
rescue plan
which would make provision for a prospective business partner to
enter into a long-term lease with the Department in
order to avoid
the acquisition of shares by the partner.
9.4.9
The proposed amended business rescue plan was however
not acceptable
to the Department. This proposed plan of Bester was published
on 22 October 2021, but was replaced with an
amended business rescue
plan, authored and published by the Department, which he accepted.
9.4.10
The amended plan proposed by the Department was adopted at a meeting
of creditors on 31 January 2022, and makes provision inter alia for
the Department providing the necessary funding for creditors
to be
paid on a staggered basis until all creditors are paid by 30 April
2022.
9.4.11
Bester states that the Department failed to honour the terms of
the
amended business rescue plan and he was subsequently instructed by
creditors to proceed with a liquidation application.
10.
The MEC and the Department intervened in the liquidation application
and on 28 October 2022 the application
was by agreement postponed
sine die subject to inter alia the following:
10.1
That Ndyamara be appointed joint business rescue practioner with
Bester.
10.2
That Bester provided Ndyamara, at his request, with all information
and issues concerning the Company including
joint control of all bank
accounts such as to place Ndyamara in a position to continue as sole
business rescue practitioner should
Bester vacate his position.
10.3
That pending finalisation of the liquidation proceedings the joint
business rescue practioners submit to
the MEC/Department a monthly
cash flow analysis, bank account balances, all known debts and
expenses and income and balances for
the past and coming month and
any other relevant information.
10.4
That the MEC/Department shall continue to pay, by the 23
rd
of each month, as post - commencement finance, the shortfall on the
Company’s monthly operational costs.
10.5
That in the event of the creditors listed by Bester remain unpaid by
28 January 2023, the MEC/Department
shall serve and file its opposing
affidavits and any counter-application, with the liquidation
application then to proceed in terms
of the Uniform Rules.
11.
The list of creditors referred to above in paragraph 10.5 was
attached as Annexure A to the order by agreement and refer to
creditors which were included in the amended business rescue plan
which the Department undertook to make funds available for the
discharge of the claims. On 25 August 2022, the acting Head
of
the Department, Mr L Modise, who is also the deponent to the
Department’s affidavits made an irrevocable undertaking to
Bester to settle the abovementioned claims on condition that Bester
resign as business rescue practioner with immediate effect.
At
date of the hearing of this application, the Department has still not
paid these creditors. They first seek verification
of these
claims before payment is made, despite having agreed to doing so.
12.
Thrown into this quagmire of distrust between the Department
and
Bester is Ndyamara, who was chosen by the Department as joint
business rescue practitioner with a view apparently to take over
from
Bester upon his resignation. The Department in its founding
affidavit refers to the ensuing unworkable relationship
between
Ndyamara and Bester and Ndyamara’s threat of resignation should
Bester not be removed. This alleged threat
by Ndyamara was
proferred as one of the grounds of urgency raised in the
application. No confirmatory affidavit was deposed
to by
Ndyamara in this regard. Ndyamara did however file an affidavit
in this matter at a very late stage, just before the
arguments were
to be heard. This necessitated a postponement of the hearing in
order to give Bester an opportunity to respond
to Ndyamara’s
affidavit. I do not intend to deal with Ndyamara’s
affidavit in great detail since at the hearing
of the matter, Mr Siyo
who appeared on his behalf informed me that the affidavit and heads
of argument filed by Ndyamara represented
the outcome of his initial
or preliminary investigations in respect of Part A of the
application, which has now been abandoned,
and not Part B of the
application. The main issue relating to Ndyamara which need to
be determined is that of costs, which
I will address later in this
judgment.
Discussion
13.
I have gone to some length in listing the complaints levelled
at
Bester and his answers thereto to place this application in context.
As it transpired Ms Hofmeyer SC who appeared to argue
the matter for
the Department in the place of Mr Willis SC who had been involved in
the matter since its inception, relied on only
S 139(2) (a) and (b)
of the Act for the removal of Bester. The relief sought that
Bester be declared a delinquent director
was also correctly
abandoned.
14.
To reiterate, s 139 (2) (a) and (b) reads as follows:
“
(a)
incompetence or failure to perform the duties of a business rescue
practioner of the particular company;
(b)
failure to exercise the proper degree of care in the performance of
the practioner’s functions;
15.
Ms Hofmeyr’s reliance on these grounds is founded on
six
instances, which, so the argument goes, are not seriously disputed by
Bester. Mr Van Niekerk SC, for Bester, holds a
different view.
Be that as it may, in
Knoop NO and Another vs Gupta and Another
2021 (3) SA 88
(SCA)
where the SCA discussed certain grounds for
removal of a business rescue practitioner under s 139 (2), the court
held at paragraph
17 thereof that:
“
The court has a
discretion to enter to grant or to refuse an order for the removal of
a BRP. The discretion is exercisable
if one or more of the
grounds for removal set out in s 139(2) have been established on a
balance of probabilities. However,
proof of a ground of removal
alone does not dictate that an order for removal must follow.”
16.
With regard to the grounds under s 139(2) (a) and (b) which
are
relied on herein it was held at paragraphs 20 to 22 of the Knoop
judgment that:
“
[20]
The first ground relied on in this case was incompetence or a failure
to perform the duties of a BRP of the particular
company. Reliance on
this ground required evidence of specific instances of incompetence,
or failure to perform the BRPs duties,
in relation to the company
under business rescue. Incompetence suggests that the BRP lacked the
necessary skills to perform their
duties. It may be established by
proof that the BRP is 'of inadequate ability or fitness; lacking the
requisite capacity or qualifications'. That
is a reasonably high
bar. Merely moderate ability does not amount to incompetence. Nor
does the failure to meet the standards that
the affected party would
like to see achieved, whether that relates to the time taken to
complete the business rescue process,
or the prices at which assets
are sold, or the manner in which the BRP approaches their task. The
alleged incompetence must relate
directly to the performance of the
task of a BRP. An inability to perform the role of BRP properly in
relation to the circumstances
of the particular company must be
demonstrated.
[21]
Where a failure to perform the duties of a BRP is relied on it is
essential to identify the duties that the
affected party says should
have been performed and to show the respects in which they were not
performed. A failure to convene
meetings as required by the statute
and the business rescue plan, or a failure to report to the creditors
and other affected parties,
come to mind as fairly obvious examples.
A general neglect of the duties of a BRP, where the BRP simply fails
to deal with matters
requiring attention in a regular and timeous
fashion, may suffice, but a BRP who is attending to matters in a
manner which the
affected party does not approve of is not failing to
perform their duties.
[22]
A failure to exercise a proper degree of care in the performance of
their functions will in most instances
require proof of negligence.
It is difficult to see how that could be shown by way of general
allegations without reference to
specific instances of negligence.
While proof of harm to the company, whether in the implementation of
an approved business plan
or from the perspective of its future
operations after business rescue is terminated, may not be a
prerequisite to proof of a failure
to exercise a proper degree of
care, in the absence of harm it may be difficult for a court to
conclude that the BRP has not exercised
a proper degree of care. At
the very least the potential for harm to have been caused by the
actions of the BRP must be considered
even if that harm was averted
or did not materialise.”
17.
With the above in mind I now deal specifically with the six
instances
highlighted as establishing the grounds for removal under s139 (2)
(a) and (b).
17.1
That Bester exacerbated the company’s debt position by
committing it to further supply agreements when
it was already
oversupplied with tea stock.
17.1.2
In the founding affidavit, the Department’s Modise relies
on
information received from the plant’s general manager, Mr M
Baard in respect of the daily operations at the plant.
In this
regard it was stated that Baard had informed that Bester had acquired
additional tea stock while there were good stockpiles
available.
As an example of such an additional tea purchase reference is made to
tea bought from one Pierre with whom Bester
had entered into an
agreement to deliver tea to the company. Baard has however not
deposed to a confirmatory affidavit to
the founding affidavit.
Some two weeks later a supplementary founding affidavit was filed
wherein the allegation that Bester
bought additional tea from Pierre
was retracted as well as the allegation referred to herein-above at
paragraph 7.4 that it was
unheard of in the industry to package tea.
This supplementary affidavit was accompanied by a confirmatory
affidavit from
Baard. Only the bald allegation that Bester
purchased additional tea stock, without any particularity, thus
remains.
17.2
Bester entered into agreements with customers on prejudicial
commercial terms.
17.2.1
This complaint relates to the Crown Tea deal and the allegation
by
the Department on the strength of the unconfirmed information
received from Baard, that the company carries the cost of the
packaging of the Crown tea. Bester has denied this allegation
and stated that the price of the tea supplied to Crown included
the
packaging thereof. The rule in
Plascon-Evans Paints Ltd v
Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A)
applies and
this issue must be determined on the version of Bester.
17.3
Bester concluded unaffordable loan agreements at excessive rates of
interest when the Company had already
received post-commencement
funding from the Department in the amount of R20 million.
17.3.1
S135 (2) of the Act makes provision for obtaining post commencement
financing. The MOA entered into between the parties provides
for post-commencement financing over and above the R20 million
funding the Department had undertaken to provide. Bester has
in
my view given a reasonable explanation for the high interest rates
attached to the short term loans obtained.
17.4
Bester failed to comply with his most basic obligations as a business
rescue practioner such as providing
monthly reports to affected
parties and the Court.
17.4.1
After Bester had attached to his answering affidavit some twenty
six
reports he had sent to affected persons and the Department, the
Department has in its replying affidavit admitted to being
in
possession of seven of the reports, the argument now, in an about
turn, is that Bester has failed to prove that he had delivered
all
the reports.
Bester has not answered
to the complaint that he had failed to provide reports to the court.
I must therefore accept that
Bester has in this regard not complied
with 132 (3)(b) of the Act which places an obligation on the business
rescue practitioner
to deliver monthly reports to the court if the
proceedings had been the subject of a court order and it had not been
finalised
within three months of the start of the proceedings.
This is a factor which must be taken into account when determining
whether
I should exercise my discretion in ordering the removal of
Bester.
17.5
Bester misunderstood his powers and duties under the Act.
17.5.1
This complaint relates to the allegation that Bester failed to
suspend certain producer supply contracts. The complaint
appears to be two-fold. Firstly, that in breach of the business
rescue plan and the Memorandum of Agreement, Bester failed to halve
the intake and purchase of the 2020 volumes of rooibos, an
allegation
which Bester has denied. Secondly, flowing from his answering
affidavit, that he cannot suspend contracts without
a court order,
the contention is that he does not understand the powers and duties
of a business rescue practitioner since s136(2)(a)
of the Act allows
for a business practioner, during the course of business rescue
proceeding to:
“
(a)
entirely, partially or conditionally suspend, for the duration of the
business rescue proceedings, any
obligation of the company that-
(i)
arises under an agreement to which the company was a party at
the commencement of the business rescue proceedings; and
(ii)
would otherwise become due during those proceedings . . .”
In terms of s136 (2)
(b) a court order is only required when the business rescue
practioner wishes to “entirely, partially
or conditionally
cancel” any obligations of a company as contemplated in s 136
(2) (a).
17.5.2
There is no indication, whether from the the business rescue plan
or
the Memorandum of Agreement, that Bester had a duty to suspend any
contracts. The undertaking was that he reduce by 50%
the tea
volumes for 2020 and renegotiate volumes and prices of tea for 2021.
The argument here is purely academic and that
is that Bester is
incompetent because he does not comprehend the difference between the
suspension and cancellation of a contract.
In this regard note
should be taken of the remake in
Knoop
at paragraph 42 thereof
that “
The conduct of the BRP’s can only be assessed in
the light of their duties in terms of those [business rescue] plans.”
(Own insertion in
brackets)
17.6
Bester purported to have an amended business rescue plan adopted when
the law does not provide for an adopted
rescue plan to be amended.
17.6.1
This instance or ground of incompetence was not the case for the
Department in the founding affidavit. The impermissibility to
amend an adopted business rescue plan was pointed out in the
affidavit of Ndyamara. In his answering affidavit to Ndyamara’s
affidavit Bester states that since the first business
rescue plan
allowed for an amendment by majority vote the amended business rescue
plan was validly adopted.
17.6.2
Ms Hofmeyer relied in her argument on this issue on
LSO Consulting
Engineering (Pty) Ltd and Another v Ndyamara and Others 2022 JDR 0212
(GP),
a judgment in an application for leave to appeal (where
Ndyamara
in casu
was one of the business rescue practioners
involved) in which Basson J held as follows in paragraphs 14 to 16
thereof:
“
(14)
. . . . . . . The conspicuous absence from the
Companies
Act of any
procedure
to amend a plan that has been “finally” adopted at a
meeting convened in terms of
section
151
of
this Act, cannot be ignored. And to reiterate, the scheme of
the Act is that business rescue proceedings are supposed to
end
within a reasonable short time. There are strict time limits
and procedures that must be followed for the development
and
implementation of a business rescue plan. Unless a court otherwise
permits, it must end within three months. It is therefore
simply
inconceivable that a situation can arise where the business rescue
practitioner fails to implement the plan as adopted and
then proceed
to seek an amendment of the plan a year or more after
its final adoption.
(15)
Whilst the respondents fully recognise in their heads of argument the
legal principle that courts may not
supplement an omission in law as
this would be the function of the legislature, the respondents
nonetheless persist with the argument
since there is no statutory
prohibition in the
Companies
Act that
precludes
the amendment of an adopted business rescue plan, such an amendment
would be “permissible”. I have indicated
in my
judgment why this is not permissible and why I do not agree with the
respondents’ submissions in this regard.
(16)
Lastly, regarding the submission that the creditors have voted by
majority in favour of an amendment.
I am not persuaded that
another court would come to a different conclusion in
respect of this court’s finding:
There is simply no room
for a business rescue practitioner to reserve to himself the right to
amend a business rescue plan.”
17.6.3
Ms Hofmeyer also referred to paragraph 22 of
Vantage Goldfields SA
(Pty) Ltd and Others v Arqomanzi (Pty) Ltd 2022 JDR 3859 (SCA)
wherein the Supreme Court of Appeal reiterated that there is no
provisions in the Act for the amendment of a business rescue plan
once it has finally been adopted.
17.6.4
The
Vantage
case however dealt with the unilateral amendment
of an adopted business rescue plan by the business rescue
practioner. Whilst
the adopted business rescue plan included a
clause which made provision for the business rescue practioner to
“
have the ability, in his sole and absolute discretion, to
amend, modify or vary any provision of the Business Rescue plan,
provided
that at all times the BRP act reasonably”,
the SCA
held at paragraph 25 of the judgment that at most such a clause in an
adopted plan would only allow for amendments of an
administrative
nature that do not affect the substance of the plan. The SCA
explains in paragraph 25 of the judgment that:
[25]
The
Companies
Act is
,
however, clear on one aspect: business rescue plans are the product
of engagement between the practitioner and the creditors.
In terms
of
s
145(1)
the
creditors are entitled to be informed of ‘each court
proceeding, decision, meeting or other relevant event concerning
the
business rescue proceedings’ and may ‘formally
participate in a company's business rescue proceedings to the extent
provided for in this Chapter’. As remarked in Booysen,
‘control over the rescue proceedings is to be exercised
by
democratic majority vote of creditors and affected parties’. A
clause in a business rescue plan that provides for the
unilateral
amendment
of the plan by the practitioners is accordingly contrary to the
scheme of the
Companies
Act. At
most
such a clause in an adopted plan would only allow for amendments of
an administrative nature that do not affect the substance
of the
plan.
(own underlining)
17.6.5
I do not understand from a reading of the
Vantage
judgment
that an amendment to an adopted business rescue plan can never be
sustained. It was in any event also recognised
in the
Knoop
judgment
supra
that “
One cannot treat a business
rescue plan as being writ in stone or having the same status as the
law of Medes and Persians.”
.
(paragraph 48).
17.6.6
In casu
the adopted business rescue plan of October 2020 in
part C
(iv) states as follows:
“
Should there be
a need to substantially amend the plan in a manner that affects the
rights or is prejudicial to affected persons
at any time after the
approval thereof, the business rescue practioner will be entitled to
do so in consultation with creditors.
Any amendments to the
plan will be voted on by the creditors of the company by majority
vote at a special meeting convened by the
business rescue practioner
for the purpose to vote on the proposed amendments.”
17.6.7
There is no dispute that the meeting with creditors was held on
31
January 2022 and that the proposed amended business rescue plan was
accepted unanimously. In light of what the SCA stated
in
paragraph 25 of the
Vantage
judgment, I am of the view that
the MEC/Department failed to show that the amended business rescue
plan was not validly adopted.
Discussion
18.
With regard to the six instances discussed above, which it
is
contended by the Department, support their application for the
removal of Bester on the grounds of incompetence and failure
to
exercise the proper degree of care in the performance of his duties
as contained in
s139
(2) (a) an (b) of the Act, I have already in
part discussed these instances with reference to the comments made by
the SCA in the
Knoop
judgment and which are reproduced in
paragraph 16 herein. For instance the lack of particularity
relating to the complaint
of Bester committing to further supply
agreements of tea stock, the hearsay evidence and speculation that
the company failed to
charge Crown Tea for the packaging of tea, the
complaint relating to Bester’s obtaining post-commencement
financing and the
exorbitant interest rates committed to in spite of
the business rescue plan and the Memorandum of Agreement making
provisions for
post-commencement financing and what I consider to be
a reasonable explanation for the high interest rates charged.
In all
of the above instances the Department has, in my view, not
established on a balance of probabilities, the basis for removal of
Bester as business rescue practioner on the grounds set out in s136
(2) (a) or (b).
19.
I have already dealt with the issue of the validity of the
amended
business rescue plan and all that remains of the specific complaints
are the failure to report to court and the some extent
Bester’s
failure to appreciate the difference between the suspension of a
contract and the cancellation thereof. The
question, in my
view, to be answered in this regard is whether the Company or the
business rescue proceedings have been prejudiced
as a result of
Bester’s failings in these respects. No prejudice has
been shown by the Department in this regard.
I also cannot
fathom how Bester’s failure to report to court caused the any
prejudice, neither his misunderstanding of a
business rescue
practioners power to suspend contracts in circumstances where the
business rescue plan does not impose a duty on
him to suspend
contracts.
20.
Be that as it may, Ms Hofmeyer has argued that the listed complaints
relied on by the Department should not be viewed in isolation but
that I should have regard to the full conspectus of all the relevant
issues, inclusive also of the fact that the Company has been in
business rescue for more than two and a half years.
21.
While it cannot be argued that the delay in the finalisation
of the
business rescue proceedings is worrisome, it is not necessarily
indicative of incompetence on the part of the business rescue
practitioner. S 139 (2) (a) speaks of incompetence or failure
to perform duties in relation to the specific company.
Herein
lies the problem, in my view. The Company was established by
the Department with lofty ideals, for the benefit, not
only of the
province but for the upliftment of emerging farmers. My sense,
from a reading of the papers, is that Bester respects
this underlying
principle, hence for instance the amendment to the business rescue
plan when it became clear that the Department
was not willing to
relinquish part of its shareholding to a partner who would not
necessarily share its vision, even though the
necessity of a business
partner was recognised in not only the first business rescue plan but
also in the Memorandum of Agreement.
22.
A business rescue practioner however has an obligation to act
in the
interests of all the creditors and not only in the interest of the
Department. In my view the weakness of Bester as
business
rescue practioner is that he did not apply for the liquidation of the
Company sooner. This however is not the case
brought by the
Department against Bester. In fact the Department has stated
unequivocally that it will not allow the Company
to be liquidated and
that it will fight tooth and nail in opposing any such application.
23.
Having said that, I am not of the view that the complaints
raised by
the Department sustain an order for the removal of Bester as business
rescue practitioner.
Cost
of the application
24. The attitude of
Bester was initially that the application be dismissed for lack of
urgency. After the ventilation
of all the issues Mr Van Niekerk
now argues that the issue of urgency and the manner in which the
application was driven be considered
in the determination of whether
or not a punitive cost order should be granted against the
Department.
25.
The application was served on Bester’s correspondent attorney
on 21 December 2022, while Bester
was on holiday with his family, and
set down for 20 January 2023. The reasons given for the urgency
of the matter were
inter alia
that the Company cannot be
rescued under Bester, it is foreseeable that a creditor could apply
to convert the business rescue proceedings
into liquidation, Bester
and Ndyamara have an unworkable relationship, the possibility of
Ndyamara resigning is real and would
be disastrous, by the time the
application is heard in due course Ndyamara would in all probability
have resigned and an urgent
hearing, if successful, will result in
the Department and Ndyamara being placed in a position to put a
proper and workable plan
before creditors before the end of January
2023.
26.
Ndyamara did however not file a confirmatory affidavit with regard to
his role in the alleged urgency
of the matter and all that was left
was the general assertion that business rescue proceedings are
inherently urgent. This
is not in my view sufficient
explanation for the undue haste with which this application was
placed before court, especially in
light of the fact that already in
September 2022, the Department’s Modise, in his interim
opposing affidavit to the liquidation
application, states that an
application for the removal of Bester would follow. More than
three months before the application
was served on Bester.
27.
Quite understandably Bester did not have sufficient time to respond
to a founding affidavit consisting
of more than 600 pages inclusive
of annexures and when the matter was first heard on 20 January 2023,
he had only been able to
file an interim opposing affidavit and
requested time to file a supplementary opposing affidavit. On
that day the applicants
had also not yet given notice to all affected
persons of the proceedings as required and the matter was in any
event not able to
proceed. The matter was then postponed to 10
February 2023 with the costs reserved.
28.
On 10 February 2023 Ndyamara had joined the fray, having filed his
affidavit on 8 February 2023 after
having been served with the
application on 21 December 2022. On this date the affected
persons had still not been given notice
of the proceedings, the
papers were not properly paginated and Bester was entitled to respond
to the affidavit of Ndyamara.
The matter was as a result
postponed to 13 April 2023 with the wasted costs occasioned by the
postponement reserved.
29.
As already mentioned herein, when argument was finally heard on 13
April 2023, the Department abandoned
the majority of its complaints
contained in the founding affidavit (which I attempted to set out as
fully as possible herein),
either because it would result in material
disputes of fact, was speculative and/or hearsay. All of which
the Department
should have been aware of right from the start but
which had resulted in the papers in this application amounting to
close to 2000
pages in total.
30.
I see no reason why Bester should in these circumstances be saddled
with unnecessary costs relating
to this application and agree that a
punitive cost order against the Department is appropriate.
31.
Mr Van Niekerk’s request that Ndyamara share in the costs of
the postponement on 10 February 2023
is also not unreasonable in the
circumstances. Mr Siyo’s argument that the matter would
in any event have been postponed
as a result of the Department’s
failures is in my view opportunistic and not wanting of any further
consideration.
I do not however consider it appropriate that
Ndyamara pay the costs
de bonis propriis
as argued by Mr Van
Niekerk, in light of the fact that he had abandoned argument on the
merits of Part B of the application.
In
the circumstances the following order is made:
(a)
Part B of the application is dismissed with costs on the
attorney client scale, inclusive of the wasted costs occasioned by
the
postponements on 20 January 2023 and 10 February 2023.
(b)
The second respondent is ordered to pay the costs of 10
February 2023 jointly and severally with the applicant on the
attorney and
client scale.
CC
WILLIAMS
JUDGE
For
Applicant:
20
January 2023, 10 February 2023
Adv R
Willis SC with Adv M Phukubje
13
April 2023
Adv K
Hofmeyr SC with Adv Phukubje
Dlamini
Attorneys
c/o
Mkhokeli Pino Attorneys
For
1
st
Respondent:
Adv J
Van Niekerk SC
Hurter
Attorneys
c/o
Duncan & Rothman
For
2
nd
Respondent:
Adv L
Siyo
Boqwana
Burn Inc
c/o
Van de Wall Inc